Doing it Right in an Uncertain Legal Climate: Arbitration Agreements January 23, 2013 Los Angeles, California Sponsored by Sidley Austin LLP Panelists: Elliot K. Gordon Mark E. Haddad Wendy M. Lazerson #IHCC12 1
Overview Introduction Key Recent and Pending Cases General Tips and Suggestions Employment Arbitration Agreements 090701_2 2
Foundational Cases Stolt-Nielsen v. AnimalFeeds Int l Corp., 130 S. Ct. 1758 (2010): Refusing to permit class action arbitration where commercial parties have not affirmatively agreed to it. AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011): Preempting state laws that limit the enforceability of class action waivers. CompuCredit Corp v. Greenwood, 132 S. Ct. 665 (2012): Enforcing arbitration of a claim under a Federal Consumer Protection statute that barred waiver of a private right of action. 090701_3 3
Supreme Court Cases to Watch 2013 Sutter v. Oxford Health Plans LLC, 675 F.3d 215 (3rd Cir. 2012), cert. granted, 2012 WL 3096766 (U.S. Dec. 7, 2012) Issue: What contract language is necessary, following Stolt-Nielsen, to show agreement to classwide arbitration. Implication: Possible holding that only express consent can authorize classwide arbitration; may effectively end class arbitration. In re American Express Merchs. Litig., 667 F.3d 204, 214 (2nd Cir. 2012), cert. granted, 2012 WL 3096737 (U.S. Nov. 9, 2012) Issue: Whether interest in vindicating federal statutory rights (Sherman Act) renders class action waiver unenforceable. Implication: Possible limit on Concepcion for federal statutes 090701_4 4
Federal Court of Appeals Cases to Watch 2013 Kilgore v. Keybank, N.A., 673 F.3d 947 (9th Cir. 2012), reh g en banc granted, 697 F.3d 1119 (9th Cir. Sept. 12, 2012) Issue: Whether FAA preempts state rule that makes claims for public injunctive relief non-arbitrable Whether impairment of state statutory rights avoids FAA preemption; see also American Express (above); Iskanian (California Supreme Court below) D.R. Horton, Inc. v. NLRB, 357 NLRB No. 184 (Jan 3, 2012), appeal pending, No. 12-60031 (5th Cir. 2013) Issue: Whether NLRA prohibits mandatory class action waiver Implication: Possible limit on Concepcion for federal statutes 090701_5 5
California Supreme Court Cases to Watch 2013 Iskanian v. CLS Transp. Los Angeles, LLC, 206 Cal. App. 4th 949 (2012), review granted and opinion superseded, 286 P.3d 147 (Cal. 2012) Whether, after Concepcion, class action waiver may be unenforceable if it would interfere with vindication of state statutory rights (labor claims and private attorney general actions) 090701_6 6
California Supreme Court Cases to Watch 2013 Sonic Calabasas A, Inc. v. Moreno, 51 Cal. 4th 659 (2011) cert. granted, judgment vacated, 132 S. Ct. 496 (U.S. 2011) Remanded for reconsideration based on Concepcion: whether arbitration clause is unenforceable to waive statutory right to administrative labor proceeding Sanchez v. Valencia Holding Co., LLC, 201 Cal. App. 4th 74 (2011) review granted and opinion superseded, 272 P.3d 976 (Cal. 2012) Application of state law unconscionability rules following Concepcion 090701_7 7
The law is in flux Enforceability of Arbitration Agreements in Employment Cases Pending cases may provide clarity Meanwhile, courts disagree 090701_8 8
Class Action Waivers in FLSA Cases: Courts Disagree Fair Labor Standards Act Cases Finding Class Action Waivers Enforceable Killion v. KeHE Distributors, 2012 WL 3201889 (N.D. Ohio Aug. 3, 2012) LaVoice v. UBS Financial Services, Inc., 2012 WL 124590 (S.D.N.Y. Jan. 13, 2012) De Oliveira v. Citicorp North America, Inc., 2012 WL 1831230 (M.D. Fla. May 18, 2012) Coleman v. Jenny Craig, Inc., 2012 WL 3140299 (S.D. Cal. May 15, 2012) 090701_9 9
Class Action Waivers in FLSA Cases: Courts Disagree Fair Labor Standards Act Cases Finding Class Action Waivers Unenforceable Herrington v. Waterstone Mortgage Corp., 2012 WL 1242318 (W.D. Wis. Mar. 16, 2012) Owen v. Bristol Care, Inc., 2012 WL 1192005 (W.D. Mo. Feb. 28, 2012) Raniere v. Citigroup, Inc., 827 F. Supp. 2d 294 (S.D.N.Y. 2011) Sutherland v. Ernst & Young LLP, 768 F. Supp. 2d 547 (S.D.N.Y. 2011) reconsideration denied, 847 F. Supp. 2d 528 (S.D.N.Y. 2012) 090701_10 10
Class Action Waivers in Title VII Cases Title VII Cases Chen-Oster v. Goldman Sachs & Co., 2011 WL 2671813 (S.D.N.Y. July 7, 2011) Refused to enforce arbitration as to Title VII pattern-or-practice claim Karp v. Cigna Healthcare, Inc., --F. Supp. 2d --, 2012 WL 1358652 (D. Mass. Apr. 18, 2012), reconsideration denied (Sept. 14, 2012) Enforced arbitration Would arbitration impair vindication of a substantive right, or is a pattern-or-practice claim just a method of proof that could be litigated in arbitration? 090701_11 11
The Uncertain Status of Agreements That Are Silent on Class Arbitration 090701_12 12
Silence on Class Arbitration: Some Courts Permit Class Arbitration Smith & Wollensky Rest. Grp., Inc. v. Passow, 831 F. Supp. 2d 390 (D. Mass. 2011) (appeal dismissed) any claim that would be resolved in a court of law includes a claim brought as a class action Hayes v. ServiceMaster Global Holdings, Inc., 2011 WL 2580555 (N.D. Cal. June 29, 2011) Arbitrator may decide if agreement contemplated class arbitration Jock v. Sterling Jewelers Inc., 646 F.3d 113 (2d Cir. 2011) cert. denied, 132 S. Ct. 1742 (U.S. 2012) Usual rules of contract interpretation applied to determine implicit agreement to submit to class arbitration 090701_13 13
Silence on Class Arbitration: Other Courts Bar Class Arbitration Underwood v. Palms Place, LLC, 2011 WL 1790463 (D. Nev. May 10, 2011) Stolt-Nielsen applied to bar class arbitration where agreement was silent Motion to vacate arbitrator s order denied Goodale v. George S. May Int l Co., 2010 WL 2774013 (N.D. Ill. July 14, 2010) Applying Stolt-Nielsen to bar class arbitration Sanders v. Forex Capital Mkts., LLC, 2011 WL 5980202 (S.D.N.Y. Nov. 29, 2011) Stolt-Nielsen requires individual arbitration where no provision in contract contemplated class arbitration 090701_14 14
Silence on Class Arbitration: Other Courts Bar Class Arbitration Nelsen v. Legacy Partners Residential, Inc., 207 Cal. App. 4th 1115 (2012), as modified on denial of rehearing (Aug. 14, 2012), review denied (Oct. 31, 2012) Contract text stating agreement covered only claims between named entities unambiguously showed intent not to arbitrate class claims Reed v. Florida Metro. Univ., Inc., 681 F.3d 630 (5th Cir. 2012) Likely to be resolved by Oxford Health Plans 090701_15 15
California Employment Arbitration Agreements Employer arbitration agreements are different. Procedural and substantive unconscionability what does this mean? 090701_16 16
Significant Takeaway Points: Checklist Define scope: what is to be arbitrated? Who decides whether issue is within scope? Clear class action waiver (if desired) Where is the proceeding? Identify ADR provider Number of neutrals, and how chosen Payment of fees Rules, procedural and evidentiary 090701_17 17
Significant Takeaway Points: Checklist Scope of remedies arbitrator can award Define governing law Scope of discovery Rules governing finality and enforcement of award? Form of award Confidentiality 090701_18 18
Significant Takeaway Points: Additional Factors in Employment Cases Separate agreement, signed by employee Provide copy of arbitration rules with agreement Employer pays fees More than minimal discovery Location accessible to employee Written award Relief comparable to what would be available in court 090701_19 19
Significant Take-Away Points: Summary Plan carefully, and do not rely on old boilerplate clauses This is a dynamic legal area that is changing rapidly, so be sure you are up-to-date on what courts are saying Think through the checklists to cover those issues, especially in the employment context 090701_20 20
Panelists Elliot K. Gordon Vice President and Deputy General Counsel, Health Net, Inc. elliot.k.gordon@healthnet.com Mark E. Haddad Partner, Sidley Austin LLP mhaddad@sidley.com Wendy M. Lazerson Partner, Sidley Austin LLP wlazerson@sidley.com 090701_21 21
9 th Annual In-House Counsel Conference January 16, 2013 (Los Angeles, CA) January 23, 2013 (Anaheim, CA) www.acc.com/chapters/socal/ 22 000000_22